With persistent headwinds, Indian IT pay hikes to be significantly lower this year

Pay hikes may be as low as 2% in some cases and hover about 6% for most employees, shrinking from about 10% last year, say industry experts and hiring and staffing managers.Prachi Verma | ET Bureau | February 11, 2017, 08:39 IST

US President Donald Trump's inauguration pledge to 'Buy American, Hire American', for instance, has stoked concerns over revenue growth.In the technology industry, the career ladder isn't the only important attribute disappearing too quickly: Additional digits on payslips may be the next to go as wage-growth at software companies increasingly moves in lockstep with recent investor returns on these bellwethers.

Annual pay-raises in companies that once set wealth-creation benchmarks for both investors and employees may barely breast the consumer-inflation tape this year, reflecting persistent headwinds for a $150-billion industry built primarily around the cost end of the value spectrum.

Increases may be as low as 2% in some cases and hover about 6% for most employees, shrinking from about 10% last year, say industry experts and hiring and staffing managers.

"The industry is under significant pressure — even without factoring in the H-1B considerations. If the past three quarters are any indication of what awaits the industry, companies will find it very difficult to have the same level of performance awards as last year," said Anandorup Ghose, Partner at Aon Hewitt India.

India's most visible and globalised industry has harnessed low-cost engineering talent, an English-educated workforce, and a gradually improving telecommunications infrastructure to establish an outsourcing business that is the world's largest.

However, increasing automation to replace jobs that are repetitive in structure and content and the industry's perceived inability to move higher in the value chain have fettered expansion that has decelerated from about 19% in the immediate aftermath of the subprime crisis to an anticipated 8% this year. Wage bills are among the biggest cost factors for Indian technology and outsourcing companies that usually route projects back in India to provide superior cost benefits to Fortune 500 companies.

To the industry's entrenched challenges has been added the political uncertainty brought about by a wave of so-called de-globalisation sweeping the US and parts of Europe's richer neighbourhoods that give business to Indian companies.

US President Donald Trump's inauguration pledge to 'Buy American, Hire American', for instance, has stoked concerns over revenue growth for an industry that generates at least two of its three dollars from clients based in North America. Not surprisingly, software stocks have lately been among those that have been left out of the protracted bull run on Indian stock exchanges, with returns hovering in single digits.

Infosys, one of the bellwethers that spawned millionaires both at workplace and on the exchanges, is also staring ahead at a flat year amid the added controversy over likely deviations from set standards on compassionate capitalism.

According to an industry source, salary increases at Infosys may be lower this year, with those higher in the hierarchy feeling the heat more than those making up the lower rung. Appraisals last year were moved a few months, although the average increases of 8% were effective from April.

This year, the company is expecting lower raises, between 2% and 6%, according to the same source. "The appraisals could get moved by a few months just like last year," said the source. Officially, Infosys would not comment. Senior Vice President (HR), Richard Lobo, told ET: "It is too early to comment on this."

At smaller services-outsourcing companies such as Mphasis, it is early to commit. Mphasis appraisals were completed in October, and the average wage increase was 6%. "The average salary increase may be flat this year," an HR official at Mphasis told ET on condition of anonymity. "As of now, we are not seeing any salary cuts but increases would be lower than last year's," he said. The impact of automation on jobs and outsourcing contracts is already visible.